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Uber, a startup that allows you to hail a car from your smartphone, is facing a fresh round of legal trouble, this time in Chicago. The Chicago Tribunereports that regulators have charged the company with a number of legal violations, including assessing a mandatory 20 percent tip and then keeping a portion of that amount. Uber also faces lawsuits from its Chicago-based competitors, who claim that "Uber violated multiple Chicago and Illinois laws and engaged in false price advertising."

Uber is no stranger to regulatory controversy. Last month, the firm rallied supporters to stop a proposed bill in Washington, DC that Uber says was designed to shut it out of that market. And earlier this month, Uber was forced to scale back its presence in the Big Apple after New York regulators warned cab drivers that they could lose their license if they joined Uber's program for taxicabs.

Now regulators and competitors in Chicago are accusing Uber of breaking the rules. "If they want to suggest a tip like every single backseat credit card machine does—it suggests a 10, 20 or 30 percent tip—that's fine and we told them that," Rosemary Krimbel, commissioner of Chicago's Department of Business Affairs and Consumer Protection told the Chicago Sun-Times on Thursday. "But their whole business model is a problem because of how they charge. They're gonna eventually have to change or they will be revoked."

But Uber disputes Krimbel's description of their service.

"We discussed our model with the city and their request of us was to apply for a dispatch license," Uber's Allen Penn told us in an email. "We did so and now possess that license, so the citations came as a surprise to us."

Penn told us that for "taxis requested through the Uber system, Uber automatically adds a 20 percent gratuity to the fare, which we have always communicated to customers. The fare and full gratuity go to the driver. Drivers simply pay a small percentage of the fare as a marketing fee to Uber."

According to Krimbel, Uber is "a bit of a problem because they are having a hard time fitting into the structures cities have. We've been working with them, we've sat down with them several times, and to the point where we have a couple of items, still, that they are out of compliance, we have written them violations."

I've used Uber to hail cabs before and they're totally up-front about the 20% tip. I've also used Taxi Magic, which lets me pay and tip the driver directly, but I'm not sure what their business model is, and honestly their Android app is terrible.

I like Uber for what it is, but I've used it all of three times, because it's so incredibly expensive - I used the limo service for my wife's birthday, which was about $90 on a 15 mile round-trip, and the taxi service a couple times, mostly out of curiosity. I tip well anyway, and it was nice to just get out of the cab rather than waiting for the cabbie to grumble about not getting cash, run my card, and print me a receipt.

On the other hand, the company's approach to dealing with regulations has been ridiculous; cabbies in Chicago are required to carry a huge ($1 or 2m?) amount of insurance and comply with a lot of regulations which really just insure basic safety for both drivers and passengers. Uber's "ask forgiveness later" approach is reckless; if I were one of their investors, I'd have fled for the hills long ago.

20% sounds excessive at first, but if I'm not expected to tip extra on top of that (which might be 10% or 20% anyway), it's not so bad. I understand that compulsory tipping is frowned upon, but based on my experience, a 15-18% tip at a restaurant is nearly ubiquitous, and taxi service has much less quality of service difference between drivers than at a restaurant.

Not trying to troll, and I do understand tipping servers at restaurants, however, why do I have to tip a cabby, unless he/she is helping me with my luggage or opening and closing the door for me. I mean unless some extra service is provided, why tip the cabby?

Not trying to troll, and I do understand tipping servers at restaurants, however, why do I have to tip a cabby, unless he/she is helping me with my luggage or opening and closing the door for me. I mean unless some extra service is provided, why tip the cabby?

I don't think that's trolling. It's a good question to ask. Restaurants have a pretty good scam going, since they get customers to pay part of their staff's salary directly. The minimum wage for waitstaff is far lower than it is for other people precisely because of the presumption that tips will make up the difference. I remember being paid $2.50/hour as a waiter when the prevailing minimum wage was $5.35/hr.

I wonder what cabbies make as straight salary. Is it also less than normal minimum wage with the assumption that tips make up the difference?

I wonder what cabbies make as straight salary. Is it also less than normal minimum wage with the assumption that tips make up the difference?

At least in my experience cabbies are treated as independent's. They pay a daily "gate" fee for the lease of the cab for their particular shift and then they make as much money as they can. If they don't make enough to cover gate, too bad. If they need to pay for gas that comes out of the money from their fares, and their take home is whatever's left after those expenses. In SF they take a haircut on fares payed by credit card which is why you'll often find that the machine is "broken". Tips are basically in the same pool of take home money as fares at the end of their shift.

Not trying to troll, and I do understand tipping servers at restaurants, however, why do I have to tip a cabby, unless he/she is helping me with my luggage or opening and closing the door for me. I mean unless some extra service is provided, why tip the cabby?

I've often wondered the same thing. At my wedding, the caterer basically asked for a tip beforehand by including a line for it in part of the upfront costs... tipping the caterer might be customary, but I'm sure as hell going to base the amount on the service provided. An invoice from a moving company had a portion explaining that we should tip our movers and suggested an amount, we happily tipped them because they worked really hard to get done quickly, but still found the invoice to be tacky. I like when places don't accept gratuity, it puts the onus of providing good customer service on the company, it's in their interest to make sure their employees are doing well.

I always wonder if crappy servers know they're crappy, or just blame their customers for being cheap to explain small tips. Anyway, I too think tipping should be for service that is above and beyond, but I'm not about to stop tipping at restaurants.

Not trying to troll, and I do understand tipping servers at restaurants, however, why do I have to tip a cabby, unless he/she is helping me with my luggage or opening and closing the door for me. I mean unless some extra service is provided, why tip the cabby?

I don't think that's trolling. It's a good question to ask. Restaurants have a pretty good scam going, since they get customers to pay part of their staff's salary directly. The minimum wage for waitstaff is far lower than it is for other people precisely because of the presumption that tips will make up the difference. I remember being paid $2.50/hour as a waiter when the prevailing minimum wage was $5.35/hr.

I wonder what cabbies make as straight salary. Is it also less than normal minimum wage with the assumption that tips make up the difference?

My understanding, at least here in Canada, is that many cars are independently owned. The drivers (often more than one sharing a car) must pay to own/maintain the car, then they must pay the cab company for the privilege of using their dispatch/branding to find jobs, leaving only a tiny amount of each fare as profit.

Not only a mandatory gratuity, but an excessive mandatory gratuity?! That would be an "uber" no-thank you from me.

Uber is definitely expensive--but in DC and the surrounding areas they have one key advantage over the competition: they actually show up. I've been in the middle of DC late at night and been unable to find a regular taxi--whipped out my phone and was in an Uber car five minutes later. Then on top of it DC taxis will often refuse to take you to Arlington and vice-versa (despite the fact that, I don't know what the law is in Arlington, but in DC it's definitely illegal for them to do this), another thing which Uber does not give you grief about. I don't use them all the time because they're about $10 more expensive than a normal taxi, but in a pinch, they're a lifesaver. Oh and the only reason they don't have the cheaper Uberx service in DC (which would cost about the same as a normal taxi) is because the DC taxi commission is blocking them from doing so.

I definitely wouldn't use Uber over a yellow cab in New York, though. But again in DC it's worth paying a few extra dollars to get home without having to stalk around looking for a taxi that will take you where you're going.

I wonder what cabbies make as straight salary. Is it also less than normal minimum wage with the assumption that tips make up the difference?

It depends on the cab company setup. In some cases the cabbies work for the company and are paid a base salary (which is typically extremely low) and hope to make good tips. In others the cabbie essentially rents the cab from the company and has to hope the fares and the tips will allow him to make a living. I have even heard of companies that require a cab driver to supply his own cab but he still works for them.

At any rate cabbies usually don't earn shit and rely on tips to make up what their base pay doesn't give them. In short, it's like any other service job in the country only we seem to arbitrarily decide who gets to be tipped and who shouldn't be. It doesn't help that some companies are now attaching "fees" to services that were before provided gratis either (ever notice the charge of a few bucks on top of the "tip" to get a pizza delivered now?).

(ever notice the charge of a few bucks on top of the "tip" to get a pizza delivered now?).

This is why I always walk to the pizza parlour and take away my own stuff. Unless it's 11 at night and I forgot to eat/don't feel like cooking, it's worth it to me to brave the elements to avoid paying a driver.

Maybe it's a cultural thing (though tipping is prominent everywhere I've been), it always seemed to me an insult that I had to pay to encourage wait-staff to do their job.

But then, I find it grossly offensive that wait-staff in the States get paid crap so little.

(ever notice the charge of a few bucks on top of the "tip" to get a pizza delivered now?).

This is why I always walk to the pizza parlour and take away my own stuff. Unless it's 11 at night and I forgot to eat/don't feel like cooking, it's worth it to me to brave the elements to avoid paying a driver.

Maybe it's a cultural thing (though tipping is prominent everywhere I've been), it always seemed to me an insult that I had to pay to encourage wait-staff to do their job.

But then, I find it grossly offensive that wait-staff in the States get paid crap so little.

Having been on the other end of this in Germany, I completely get why people find American tipping culture distasteful, but believe me, it's better than the alternative. I've actually tried to get a glass of tap water with my beer (in Germany) only to be told "we don't have that".

I think the real problem is that Uber is disruptive. It's not something regulators are used to, and bureaucrats _hate_ change. That's generally why their bureaucrats.

Uber may not be helping the situation, but I would opine they're also not really the root cause.

Regarding tips, if there's a pre-entered tip I don't pay it. I don't mind the little tables with pre-figured tips, but the only person that gets to determine my gratitude for a service is me. And I don't appreciate being told that I appreciate something.

I think the real problem is that Uber is disruptive. It's not something regulators are used to, and bureaucrats _hate_ change. That's generally why their bureaucrats.

Uber may not be helping the situation, but I would opine they're also not really the root cause.

Regarding tips, if there's a pre-entered tip I don't pay it. I don't mind the little tables with pre-figured tips, but the only person that gets to determine my gratitude for a service is me. And I don't appreciate being told that I appreciate something.

In general I agree...I think the point with Uber though is that you get in and get out without ever having to deal with money with the driver. This is good when you find yourself using Uber to get yourself home when you're really drunk.

If only there was a way to hail a cab using one's smartphone without going through a special service that tacks on a 20% "tip."

Oh but there is, those who want to need only chuck their smartphone at the cab to hail it. If they miss, they'll just have to try again. But the special service would be a cheaper alternative. There's really only two ways you can use a smartphone to hail a cab, use the phone to call the cab service or use a special service app to request a cab. 20% is excessive imo, but I don't make a living being a cabbie.

Voice or data... are cab companies doing SMS? I could see Yellow Cab having NFC pads on designated poles/places through out the city that could be used to summon a cab in the future. It would be able to sync your location, provide a contact number and name, and could even send a picture to the cab so they know who they're picking up. Crap, I better go patent that idea now!

Not trying to troll, and I do understand tipping servers at restaurants, however, why do I have to tip a cabby, unless he/she is helping me with my luggage or opening and closing the door for me. I mean unless some extra service is provided, why tip the cabby?

If the state didn't try to get in the way of private transactions between private parties, companies and individuals wouldn't have to lie about the real intent of what they're doing. The state has no business telling people who they can buy transportation services from. It's nothing but a way to protect incumbents in the business.

Thanks for that, I had totally missed all the shenanigans with Airbnb that the article brought up. Some parallels to Uber there - most people renting their places probably are breaking some local law, foregoing their homeowners/renters insurance, and more than likely breaking their leases.

And it's always nice to be reminded of what a cold-titted cunt Rand was.

(ever notice the charge of a few bucks on top of the "tip" to get a pizza delivered now?).

This is why I always walk to the pizza parlour and take away my own stuff. Unless it's 11 at night and I forgot to eat/don't feel like cooking, it's worth it to me to brave the elements to avoid paying a driver.

Maybe it's a cultural thing (though tipping is prominent everywhere I've been), it always seemed to me an insult that I had to pay to encourage wait-staff to do their job.

But then, I find it grossly offensive that wait-staff in the States get paid crap so little.

Wait staff can very easily make more than they would on minimum wage. Staff working in a nice restaurant can walk out with several hundred in a single night. Something a minimum wage worker would work a week for. Waitstaff aren't always the victims they're made out to be.

The entire system of regulation is built up for rent-seeking. What's the issue of they tell you upfront, and all participants are aware of the 20% gratuity? The department of "Consumer Protection" is entirely a misnomer; more like protection racket and barriers to entry department

If only there was a way to hail a cab using one's smartphone without going through a special service that tacks on a 20% "tip."

Cute.

But, in my experience, getting a cab to actually come when you call them (no matter what guarantees the dispatcher may offer) is an even more futile endeavor than trying to flag one down on the street. Uber cars may be more expensive by a fair margin. But they can be actually relied upon. And when you really, REALLY, need that cab/Uber/whatever; the extra cost is worth it.

Do you really thing Uber, with its hefty surcharges, would have caught on at all if the existing taxi system weren't so appallingly awful?

From what I can tell from the article this seems totally reasonable. Mandatory == not a tip, just a way to list your top line price 20% cheaper than what it actually is. This is exactly like what asshole phone companies and travel agnets used to do: advertise one price but then add on a bunch of extra mandatory fees. And the FTC said no, you have to avertise the acutal price. Good deal.

I don't care if they add a fee on top of the base rate, I don't care if Uber takes some of it, or if they charge the driver an advertising fee. I don't even care if they pretend that keeping a fraction of the service fee vs. the driver paying them a fraction of the fare for advertising are somehow different things. But they should advertise the actual price they are charging. Anything above that should be optional at the discretion of the rider.

There are other screwed up things about taxi regulations (although many of them with good cause: many taxi drivers are total scam artists). This rule seems totally legit.

Then why doesn't that apply to sales tax? You have to pay it for any local goods and services, so why isn't it added on to the advertised price?

The sales tax is being tacked on by a government authority, not the retailer, and the government would like you to make your purchase decision without realizing how much you will be paying them. Some retailers post tax-included prices, but they have to be obvious about it lest they look more expensive than their competitors.

Perhaps this is part of why NYC had a problem with Uber? NYC has fixed rates for taxis, and regulators might be of the opinion that Uber is effectively charging an illegally high rate.

On a related note, what really irks me are the special surtaxes levied on people who are (probably) traveling. Parking taxes, hotel taxes, etc. all well in excess of the sales tax rate.

The entire system of regulation is built up for rent-seeking. What's the issue of they tell you upfront, and all participants are aware of the 20% gratuity? The department of "Consumer Protection" is entirely a misnomer; more like protection racket and barriers to entry department

On a related note, what really irks me are the special surtaxes levied on people who are (probably) traveling. Parking taxes, hotel taxes, etc. all well in excess of the sales tax rate.

Yeah, some of those taxes are amazing. But imposing taxes that your own constituents don't have to pay is a no-brainer for politicians...

From what I understand, the issue with the 20% gratuity is that Uber is taking its cut out of the fee *and* the gratuity, which I think is not legal in many places. This could be avoided simply by levying their fee only on the non-gratuity part of the transaction.

Boskone wrote:

I think the real problem is that Uber is disruptive. It's not something regulators are used to, and bureaucrats _hate_ change. That's generally why their bureaucrats.

The slam at bureaucrats - a term I'm sure you can't even define - is ignorant and not worthy of an Ars comment. Building inspectors, health inspectors, fire inspectors, taxi inspectors, etc. are basically normal, educated people who are hired to make sure that laws passed by the state or local commissions are enforced. They don't hate change, but it is a difficult situation to be in when you are required to apply a law to a company with a business model very different from the one contemplated by the legislators who drew up the law. It's not like these non-elected inspectors can just change the law on a whim or arbitrarily decide that it doesn't apply.

Realistically, Uber should have tried to address this situation themselves. Around 10 years ago, all states passed laws dealing with "electric personal assistive mobility devices," exempting them from a lot of motor vehicle statutes. (EPAMDs are Segways, and it is amazing that they got these laws passed in all 50 states). But that is a much cleaner approach than trying to argue that, say, this wheeled vehicle with a motor can be driven on the sidewalk because it isn't *really* a motor vehicle.

Of course, it's not like the streets are teeming with Segways...but it's not the fault of bureaucrats.

(There are, however, some weird consequences: in my state, if you drive a "vehicle" while intoxicated, you are guilty of drunk driving. This applies to cars, of course, but also to bicycles. However, it doesn't apply to Segways because of how these laws work. AFAIK, no one has taken advantage of this loophole. The dork factor may be too high.

From what I understand, the issue with the 20% gratuity is that Uber is taking its cut out of the fee *and* the gratuity, which I think is not legal in many places. This could be avoided simply by levying their fee only on the non-gratuity part of the transaction.

I remember Starbucks running afoul of some state labor laws because all of the employees split the tip jar, managers included.

Now how do you differentiate between:

10% of your payment including a mandatory 20% tip, and12% of your fare not including the mandatory 20% tip?

I don't think Uber would have objected to charging a direct fee for their service. Unfortunately, most cities have regulations on the various fees can be charged, and tacking on an extra 10% to 20% isn't in the municipal fee schedule. The way Uber tries to get around it is to call it a "gratuity" that's paid directly to the cab driver. In return for Uber's service, the cab driver pays Uber 10% of their fee.

From the response I've seen in cities, cabbies are quite happy to sign up. Appearances are deceiving. In New York, you try to hail a cab, and it takes 30 minutes. Lots of full cabs fly by, but no empty ones. Yet, cabbies spend much of their time cruising for fares. A cabbie looking for fares isn't going to wonder down 31st Street west of 8th Avenue just because you're standing there. They're going to cruise near hotels, and the major thoroughfares. Native New Yorkers know you may have to walk a few blocks to find a good fishing spot for empty cabs.

Is it good for the cabbies? Sure, they get a fare and a 10% tip. 10% is a low end tip, but a lot of people don't tip at all. Besides, it's a fare which is income, and not an empty cab which is an expense.

Is it worth it for the customers? I tend to tip between 15% to 20% tip for a cab ride, so to me Uber is practically a free service. What about "less generous" customers? Let's say a cab ride will be about $30. You can sit there and wait 30 minutes or more for a fee free cab, or you can get one in five minutes by paying a $6.00 premium. Is that worth it?

And once you get a cab and pay the cabbie the $30 you owe them, you still probably should to tip them something. You do a 10% tip, and instead of waiting 30 or more minutes for a cab, Uber could have gotten you one in five for just $3.00 more. If you pay the cabbie a more respectable 15%, you could have shaved 30 or so minutes of wait by paying Uber a mere $1.50 premium. Is that worth the money?

(ever notice the charge of a few bucks on top of the "tip" to get a pizza delivered now?).

This is why I always walk to the pizza parlour and take away my own stuff. Unless it's 11 at night and I forgot to eat/don't feel like cooking, it's worth it to me to brave the elements to avoid paying a driver.

Maybe it's a cultural thing (though tipping is prominent everywhere I've been), it always seemed to me an insult that I had to pay to encourage wait-staff to do their job.

But then, I find it grossly offensive that wait-staff in the States get paid crap so little.

As a Brit, the whole tipping culture in the USA just confuses the crap out of me. In the UK, we tip someone when they do a good job above and beyond what is expected. If a barber is particularly friendly and chatty, or waiting staff are extra helpful. In the USA you are EXPECTED to tip 20% when you go to a restaurant, regardless of the quality of service you get. That makes no sense. It is supposed to be a tip, not a service charge. When my brother first moved to DC he got chased out of the door by a barman for not tipping him... he wasnt even getting served at a table, he got 2 beers from the barman at the bar. Why does the barman expect a tip for doing his job?

The only way round this seems to be to make minimum wages, REAL minimum wages enforced by law that are a decent salary, and no one can legally be paid less than that. Also need to ensure that employers are legally not allowed to take a cut of the employees tips. Once this has happened then the cultural shift to tipping as a bonus for excellent service, instead of essentially mandatory tipping will start to happen.

(ever notice the charge of a few bucks on top of the "tip" to get a pizza delivered now?).

This is why I always walk to the pizza parlour and take away my own stuff. Unless it's 11 at night and I forgot to eat/don't feel like cooking, it's worth it to me to brave the elements to avoid paying a driver.

I do this too. I'd rather not pay the deliveryman. He provides a service, but I would rather do that service myself and save the money it costs.

Uber should charge a flat fee and allow the customer to decide how much to tip the driver. Uber is obfuscating how much the dispatch service costs. Customers should use other options. Every cab company provides a free dispatch service.

From what I can tell from the article this seems totally reasonable. Mandatory == not a tip, just a way to list your top line price 20% cheaper than what it actually is. This is exactly like what asshole phone companies and travel agnets used to do: advertise one price but then add on a bunch of extra mandatory fees. And the FTC said no, you have to avertise the acutal price. Good deal.

I don't care if they add a fee on top of the base rate, I don't care if Uber takes some of it, or if they charge the driver an advertising fee. I don't even care if they pretend that keeping a fraction of the service fee vs. the driver paying them a fraction of the fare for advertising are somehow different things. But they should advertise the actual price they are charging. Anything above that should be optional at the discretion of the rider.

There are other screwed up things about taxi regulations (although many of them with good cause: many taxi drivers are total scam artists). This rule seems totally legit.

The thing here is, they are advertising their actual fee. Call it what you will, a Tip, a Surcharge, an assurance of service fee. Their going rate is 20%, as cabs charge more or less depending on distance and time of travel they can't simply say $2/$20/etc.

The fact that they process this surcharge as a tip to the cabbie, and then require the cabbie to kick-back an advertising amount is (or should be depending upon bureaucrats and markets) completely within their rights as company for the way they do business. They're not making money off of the cab or limo fees, they make their money in the same way that any advertising firm does.

Why "so much"? (And I really don't find 20% to be high if the Cabbie takes the best/most direct route.) This helps to ensure that the cabbies are making a decent income per fare, which encourages the cabbie to respond to Uber calls A.S.A.P.

Likewise if the cabbie tries any of those old fare-increasing tricks, like taking a "short-cut" that costs you $3 more, the consumer can simply report to Uber the inconvenience and the cabbie will risk losing his Uber calls.

Again I point out the issue here is not that the fee is based on a percentage, most advertising and marketing companies charge based on a scale appropriate to the product. This could be reflected in number of sales, the population density of a campaign area, the readership of a publication etc.

The fact is even though they are being required to maintain a dispatch license, they are not a dispatch company in the strictest sense of the word. They are an e-Marketing company, with close ties to the dispatch industry.